Mister Softee

This is the worldwide trade mark of the US ice cream franchise founded in 1956; and who has not been cheered by the gleeful music which emanates (in E-flat major) from its delivery vans. He was welcomed into China, first, in 2007 and his presence was particularly appreciated today at the announcement of Q2’s GDP figures where the spectre of a hard landing melted.

Okay, this was less than expected with Q2 GDP growth of +9.5% against a consensus view hovering around +9.3 to 9.4%, but it was the slowest since Q3 2009. And, as IFS said “the data should also help to dispel the wilder fears of an economic collapse in China as a result of the anti-inflation fight”. Equally elegant was IHS’s serving of “a resilient slowdown”. Support, too, came from the PBOC’s Li Daokui, who sits on the central bank’s MPC. He said, on CCTV, that the inflation rate is likely to fall quickly in the second half thanks to earlier monetary tightening. His estimate for the full year is now around 4.8%. This is above the Government's official 4.0% target but much, much better than June’s 6.4%, which Li reckons may have marked the peak for the year.

Yet, a majority of the ‘intelligent’ money is still licking for another up-tick in interest rates; although both the hawks and doves read what they wanted into Premier Wen’s fourth verbal offering in nine days. “We must slow down inflation, but we must not allow big fluctuation in economic growth” he said. “We must reasonably use various monetary policy tools to make our policies more targeted”. Measures to discourage “unreasonable” housing demand were also mentioned, in passing.

The doves also flew to the better than expected industrial production, led by cement (+19.9%) and despite a flattish performance from the crude oil sub-sector (+1.6%). The same goes for retail sales which rose 17.7%. Note, too, that end-user consumption contributed 4.6 percentage points to the 9.6% GDP growth in the first half. In a circumspect World, this latter statistic should provide warm comfort.

Finally, fixed asset investment remained robust at 25.6% annualised growth in the period January through June, which is only a touch off the 25.8% for the first five months to May; although the real estate sub-sector eased back to 32.9% from 34.6% on the same basis (comment on this will arrive under separate cover; as will that on the SCI and HSI which are still open).

Life is like an ice-cream cone, you have to lick it one day at a time”
- Charles M. Schulz

GDP in Q2:
• +9.5% year on year (Q1 = +9.7%)
• consensus forecast +9.3 to 9.4%
• +2.2% quarter on quarter (Q1 = +2.1%)

Industrial output in June:
• 15.1 yoy (13.1% in May)
• consensus forecast +13.1%
• cement: +19.9% (+19.2% in May)
• crude steel: +11.9% (+7.8% in May)

Retail sales in June:
• +17.7% yoy (+16.9% in May)
• consensus forecasts +17.0%

Fixed assets investment in June:
• +25.6% yoy (+25.8% in May)
• consensus forecast +25.8

Real estate investment in June:
• +32.9% yoy (+34.6% in May)